Tips For Charitable Giving

Robin Aiken

By: Robin Aiken


The end of the year is typically a popular time for charitable giving. For those of you that are charitably inclined, now would be a great time to consider making a charitable gift of appreciated stock given the run up we’ve had in the stock market since the beginning of 2019.

Why consider appreciated stock for a gift? Discuss with your advisor before writing a check to a charity. It usually makes sense to contribute appreciated stock to a charity if you own stocks that have appreciated in value and have been held by you for at least a year and a day. I hear many reasons why donors think this is a bad idea. The first one is “the charity does not want to deal with owning XYZ stock.” Unless a charity is very small, almost all of them are happy to take your direct stock gifts. Rest assured they are not going to hold your stock; they are likely going to sell it immediately as a tax-exempt charity and convert it to cash. Another excuse I hear is “but I really like XYZ stock and do not want to give it up or give up the dividend.” You do not have to give up your favorite stock – just take the cash that you were about to use to write a check to the charity and buy back the stock in the same amount on the day you gift it. You can keep owning that stock and receiving the dividends – but if you need to sell it for some reason later your taxable gain will not be as large.

Another gifting strategy to consider if you are over the age of 70.5 years old is to directly contribute your otherwise taxable required minimum distribution (RMD) from your IRA to a charity. Current laws allow this up to $100,000. This is an easy way to avoid taxation on the RMD and help your favorite charity.

What are other ways to be strategic about your giving? Donor Advised Funds are widely available at low cost custodians like Schwab or Fidelity or via local community foundations who offer expanded services to help donors. These are a way to “prepay” some of your future charitable giving in one year and get all of the tax benefit up front, something that matters even more now that the standard deduction is much higher. This can also be helpful if you happen to have a high income year when the charitable contributions are worth more in terms of tax savings. Let’s say you give $2,500 a year to your favorite charity and happen to earn a lot more income than usual this year. You could give $10,000 to a donor advised fund now and then ask the donor advised fund to give $2,500 a year to your favorite charity for the next four years. You get all of the tax deduction benefit this year (if your total deductions are high enough) while still making your routine gifts for the next four years.

Not every strategy works well for every individual. Figuring out whether to use your RMD or use a Donor Advised Fund or which stock to give are all things that your CPA and financial advisor can help you evaluate. Understanding your tax situation is very important if you are wealthier, because there are different rules for the deductibility of different types of gifts.

The most important tip of all is to step back and think about your values and why you are giving to begin with. If you have children think about getting them involved in the discussion so that they hear about your values and can begin to think about the importance of giving. Use online resources to check out the charities you are considering and think about how your gift will have an impact.

Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients.